Homeowners' Suit Says They Are Victims in Deceptive Sales Scheme

By AL BAKER

Published: July 11, 2001

CARLE PLACE, N.Y., July 10—
They are nurses and police officers, minority couples and families, most of them from working-class New York City neighborhoods. And they say they listened avidly to the offers of affordable suburban houses on tree-lined streets near country clubs, beaches, lakes and good schools for their children.

But one Bronx couple seeking their dream home say they were duped into buying in a Suffolk County neighborhood plagued by drug dealers and prostitutes. A family from Brooklyn say they paid $171,000 for a house worth at least $50,000 less. And in every case, they say, monthly mortgage payments soared by up to $1,000 within a year after they moved in, as their foundations cracked, siding rusted and floorboards warped.

Those were just a few of the complaints in a class-action civil rights lawsuit filed today in Federal District Court in Central Islip against a long list of builders, bankers, appraisers and mortgage brokers who the suit says conspired to sell poorly constructed new homes at inflated prices, and to deceive buyers into believing that property taxes would be deferred or reduced.

Federal prosecutors say that 20 people have been criminally charged in their continuing investigation into the scheme and that 13 have pleaded guilty to charges.

The suit, brought by four named plaintiffs, claims to represent about 400 black and Hispanic families who bought homes from $160,000 to $200,000 -- 300 of them in Suffolk County and 100 in Staten Island.

It says that minority buyers were targeted in newspaper ads, featuring fake endorsements from black celebrities like Maya Angelou, Whoopi Goldberg and David N. Dinkins, and offered deals with no down payment. Many were told that they would be moving into a white or ethnically diverse area, the suit says, only to discover that their new neighborhood was segregated.

They were also promised that they would pay no property taxes for the first year, the suit says. But mortgage payments were later raised to make up for that, and 80 homes have been foreclosed on -- though the lenders were protected, the suit says, because the mortgages are insured by the federal Department of Housing and Urban Development.

''The American dream was turned into the American nightmare,'' the families' lawyer, Lenard Leeds, said after a news conference at his offices in Carle Place. ''Everyone thought they were going to provide a better life for their families, and now they are facing bankruptcy and foreclosures of their homes.''

The suit names 25 individuals, including the builders and their corporate entities, mortgage brokers and five banks. It seeks compensatory and punitive damages, as well as a stay on further foreclosures.

Mr. Leeds said the number of plaintiffs makes this the largest class-action lawsuit in New York State charging racism in real estate practices. A spokesman for the state attorney general could not confirm that.

Over the last 18 months, 20 people have been criminally charged by the federal authorities in connection with the scheme, said James E. Tatum Jr., an assistant United States attorney, who is prosecuting the case. Mr. Tatum said that the 13 who have pleaded guilty have acknowledged that they used false documents to obtain mortgages insured by HUD.

They include Isaac Toussie, one of Long Island's largest residential developers. Mr. Toussie, who is free on bail, is scheduled to be sentenced in September and faces up to five years in prison.

Mr. Leeds said that Mr. Toussie and his father, Robert, who is also a developer, headed the scheme.

Isaac Toussie's lawyer, Matthew J. Rosenblum, said he had not seen the lawsuit, and could not comment on its specifics, but said it was disheartening ''to realize that people are taking advantage of his legal situation to try to benefit themselves financially.''

Mr. Rosenblum said that when his client pleaded guilty to mortgage fraud he told the judge that home buyers, to qualify for HUD loans, would lie about their income and that he would help them to do it.

''If these very same people are the ones coming forward saying they were misled, well then, I have a real problem with that,'' he said. ''It is really disgusting.''

Mr. Leeds said the families deny that they colluded in any scheme. ''They claim that in the scheme, Toussie said that this is what has to be done and that it is always done like this and that it is required and proper,'' Mr. Leeds said. ''He said they should just listen to him and everything would be fine.''

One homeowner in Gordon Heights, Pamela Jones, said she was ''freaked out'' when her monthly mortgage payments jumped to $2,500 from $1,700 after her first year. But just as troubling, she said, was the realization that her Suffolk County house was near a block where drugs were sold.

''My son kept saying one thing that stuck in my head: 'I don't see any white people out here. The ad says we are going to be in a mixed neighborhood. I only see black people,' '' said Ms. Jones, a registered nurse.

She said she was ''stuck,'' because she can get only about $80,000 for the house, which cost her $188,000.

A named plaintiff in the suit, Juan Quintanilla, a New York Police Department detective, said he and his wife, Leticia, and their four children have struggled emotionally and economically since they moved from Richmond Hill in Queens to their house in Medford on Long Island.

''They have shot at my house because they know I'm a cop and I'm increasing the police presence by going to the cops and telling them, 'Look what's going on,' '' said Mr. Quintanilla. ''Now we are being harassed. They are calling me names, like Rat.''

Photo: Roberto Sanchez said shoddy construction caused problems, like this foundation crack in his Middle Island, N.Y., house. (Kevin P. Coughlin for The New York Times)